PB Life & Annuity Co. v. Universal Life Ins. Co., No. 20-cv-2284 (LJL), 2020 U.S. Dist. LEXIS 84703 (S.D.N.Y. May 12, 2020).

Issue Discussed: Dueling motions to compel and enjoin arbitration

Submitted by J.P. Jaillet

Date Promulgated: May 12, 2020

Case:                          PB Life & Annuity Co. v. Universal Life Ins. Co., No. 20-cv-2284 (LJL), 2020 U.S. Dist. LEXIS 84703 (S.D.N.Y. May 12, 2020).

Issue Discussed:        Dueling motions to compel and enjoin arbitration

Court:                         U.S. District Court for the Southern District of New York

Date Decided:            May 12, 2020

Issue Decided:           Whether a dispute should be resolved pursuant to a reinsurance agreement’s arbitration provision or a trust agreement’s forum selection clause.

Submitted by             J.P. Jaillet*

On May 12, 2020, the U.S. District Court for the Southern District of New York issued an order granting a cedent’s motion to compel arbitration under a life reinsurance agreement.

Universal Life Insurance Company (“ULICO”), the cedent, and PB Life and Annuity Co. Ltd. (“PBLA”), the reinsurer, were parties to a reinsurance agreement containing an arbitration clause.  ULICO and PBLA, along with a trustee, were also parties to a trust agreement that governed collateral posted by PBLA in connection with the reinsurance agreement.  The trust agreement did not contain an arbitration clause.  Instead, it contained a forum selection clause contemplating that disputes would be adjudicated by a court in New York City.

ULICO and PBLA had a dispute about whether the assets held in the trust satisfied certain collateral requirements set forth in the reinsurance agreement.  The parties also contested whether the dispute should be resolved in arbitration or in court.  PBLA filed a lawsuit seeking an injunction barring arbitration.

Ultimately, the Court entered an order compelling arbitration.  The Court concluded that a valid agreement to arbitrate existed within the reinsurance agreement.  The Court reasoned that the trust agreement’s forum selection clause did not amend, replace or supersede the reinsurance agreement’s arbitration provision.

The Court also held that the arbitration panel should decide the “question or arbitrability” — whether the dispute fell within the scope of the reinsurance agreement’s arbitration provision or within the trust agreement’s forum selection clause.  In reaching its decision that arbitrators should decide this question, the Court relied on the “broad language” of the arbitration provision and its incorporation of the American Arbitration Association’s rules, which “vests in the arbitrator the decision whether th[e] dispute falls within the scope of the arbitration clause.”

*          J.P. Jaillet is a Partner at Choate, Hall & Stewart, LLP